It’s Valentine’s Day and love is in the air! Here’s hoping that all of you have a love – of a spouse, partner, parent, child or friend – worth celebrating. Although estate planners are romantics at heart, we know that love of the romantic kind doesn’t always work out. Unfortunately, when this happens, it can sometimes impact other things that are important – like our assets. Fortunately, there are things that can be done from an estate planning perspective to protect our assets, if not our hearts, from the impact of a failed romance.

If you are getting married, or if you have a child who is planning to get married, a pre-nuptial agreement should be considered. A prenuptial (or premarital) agreement is a contract between two people who are planning to marry, by which they agree in advance to a division of their assets in the event of divorce or death. Pre-nuptial agreements are not only for the wealthy. They can go a long way toward protecting assets and future financial security against the possibility of a failed marriage. These agreements are especially important for people who come into the marriage owning assets they want to protect in the event of divorce. For young couples, this may be a house purchased by one member of the couple prior to the marriage. For others, this may be an interest in a family business, vested stock options from an employer, or an ownership interest in a family vacation home. If you have assets you would not want to be part of the
“pot” to be divided between you and your ex-spouse by a judge during a divorce proceeding, then it’s worth having a prenuptial agreement to protect that asset.

Prenuptial agreements are not just for first marriages, and not just to protect assets in the event of divorce. Those who have been married before may have children from a prior relationship. If two people who have children from prior relationships decide to marry, they may enter into a pre-nuptial agreement that not only protects each spouse’s assets in the event of a divorce, but also prevents the new spouse from claiming any interest in the estate of the deceased spouse if a spouse dies during the marriage. In this way, the deceased spouse is assured that his or her assets can be left to the deceased spouse’s children at death without the threat of interference from the surviving spouse. This can be especially important if the children of the deceased spouse are minors and may need those assets for their support and education. It can be equally important for older children who may be nervous about their potential inheritance being disrupted by a parent’s new spouse. A pre-nuptial agreement will not prevent the couple from leaving assets to each other at death if they wish but will prevent the surviving member of the couple from disrupting the deceased’s estate plan after the fact.

Whatever the motivation for creating a pre-nuptial agreement, the agreement must be created in a way that will ensure it will be enforceable if the parties divorce. Massachusetts courts have established very clear parameters that must be followed for a pre-nuptial agreement to be enforceable if, and when, the time comes for the agreement to do what it was created to do – protect assets. First, when creating and negotiating a pre-nuptial agreement, it is mandatory that both parties have their own attorneys to ensure each party understands how the terms of the agreement benefit and obligate them. Second, a pre-nuptial agreement must be fair both at the time the agreement is signed and at the time it is sought to be enforced. Third, each party must fully disclose his or her assets, including anticipated inheritances, to the other party. Finally, prenuptial agreements must be entered into freely by each party, without coercion or influence from the other party or outside influence. For this reason, courts have found that the agreement must be entered into far enough in advance of the wedding that neither party feels coerced into signing.

In addition to romantic partners protecting their own assets, we hear a lot of concern from our clients who are parents about protecting assets their children may inherit from them, and what would happen to those assets if a child divorced. A pre-nuptial agreement is a great first line of defense to protect inherited assets. The agreement can provide that any assets a party inherits during the marriage or may inherit in the future should not be considered during property division in the event of the couple’s divorce. For many couples (and their parents), a prenuptial agreement that is narrowly tailored to protect inherited assets may provide peace of mind that family wealth will not be at risk if the marriage does not work out.

If a pre-nuptial agreement is not a possibility, there are a couple of other estate planning cards a parent can play to protect assets on their own. Disinheriting a child who may be married to a problematic spouse or who is headed for divorce is always an option, but not a great one, especially because most parents are concerned about their child’s long-term well-being. A lifetime trust share for the benefit of the child is a better way to protect inherited assets. A parent can create a trust that at their death continues to hold the trust assets in trust for the benefit of their child. The Trust can provide even greater asset protection if the Trustee has discretion to distribute trust assets not just to the child, but also, perhaps to the child’s children or siblings. The purpose of these trust shares is to provide the child with less control over and access to their inheritance from a legal and practical perspective, which in turn provides protection against a child’s creditors, including a divorcing spouse. Although the protection offered by lifetime trust shares is be impacted by the identity of the Trustee, the way the Trust is administered, and the state in which the beneficiaries reside, these shares are a great tool to increase the protection of inherited assets in the event of divorce.

A prenuptial agreement is something to consider if your assets or circumstances are such that you want added assurance that no matter how matters of the heart may go, the things you care about will be protected. Whether or not a prenuptial agreement is in the cards, consider other estate planning options, like lifetime trust shares, to provide protection. As always, we are here to provide advice and counsel on these and all other estate planning matters. For matters of the heart, you will need to seek advice elsewhere.

Maria Baler, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham. She is also a former director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA), and a past President of the Board of Directors of the Massachusetts Forum of Estate Planning Attorneys. For more information, visit www.ssbllc.com or call (781) 461-1020. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.
February 2024
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